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Sino Agro Food
Investor Presentation H2 2013
Stockholm, September 2013
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Agenda
1. Executive Summary
2. Company Overview
3. Financial Review
4. Industry Overview
5. Appendix
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Sino Agro Food
• Sino Agro Food, Inc (“SIAF”) is a vertically integrated specialist food producer listed on the US OTC Bulletin Board producing
Seafood, Beef, Vegetables, Organic Fertilizer and Livestock Feed in China with revenue generated through B2B and B2C sales
– Technologically mature and robust competitive advantages through leading patents and proprietary technologies in
Recirculating Aquaculture Systems, Livestock Feed and Fertilizer fermentation enzymes enabling above average gross
margins
– Fully integrated Beef and Seafood operations through wholesale and retail sales channels under a “Farm to Plate” concept
through SIAF’s own Wholesale Centers and Food Processing facilities in Guangzhou
• SIAF’s 5-year growth plan (2010-15) is to become a leading vertically integrated specialist in the niche food segments Organic
Beef and Farmed Aquatic in China. As of H2 2013 the company is well on track to meet this goal with ramped-up operations and
stable operating cash flows resulting in high sales volume and value to match assets value
– Net Tangible Assets as of H2 2013 amounted to US$231m and expected to reach US$500m by 2015
• Founded 2006 in China by current CEO and Chairman Mr. Solomon Lee
– Company management has substantial experience in the food, agriculture and aquaculture sector in China, Malaysia and
Australia totaling an aggregate of >90 years previous industry experience
Swedish Investor Influence
• Since 2010 the reputable Swedish Jordan Fund with members has accumulated over 50% of common shares outstanding. Since
January 1st, 2013 the Jordan Fund is duly represented on the BoD through Mr. Nils-Erik Sandberg
• SIAF is fully SEC Reporting and eligible to list on a Senior US Exchange, such as NASDAQ with secondary listing on the
NASDAQ OMX First North stock market in Sweden with Certified Advisor Erik Penser Bank well in progress
– Legal due diligence with the Swedish Law Firm Delphi completed in H1 2013
Executive Summary
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• Continuing record growth in sales and operating income as business reach maturity with LTM EBITDA
amounting to US$86m (H2 2013)
• Diversification into Aquaculture, Beef Cattle, Feed and Fetilizer with control of value chain ensures robust
sales, cash flows and resilience to economic downturn
Key Investment Highlights
Strong Financial
Position
High Growth
Market
Exposure
Stable EBITDA
Generation
Highly
Experienced
Management Team
• Management team with >90 years of experience and proven track record in the food, agriculture and
aquaculture industries
• No mainland Chinese board members result in a essentially foreign controlled company with a Corporate
Governance culture focused on maximizing shareholder value
– CEO and Chairman of the BoD Solomon Lee is an Australian citizen
• Net Cash position with NTA of $231m H1 2013
• Equity Ratio of 90%
• The Company has a prudent financing policy but is actively seeking to optimise capital structure through
debt issuance
Integrated
Operations &
Technological
Excellence
• Proven proprietary technologies deployed into vertically integrated commercial facilities and operations in
food growth segments Beef and Seafood
• Market-leading supplier of proven Recirculating Aquaculture Systems in China
• Construction and operation of First in-door recirculated aquaculture prawn farm in Asia
• Strong support of local Chinese government in return for SIAF’s collaboration and subsequent empowerment
of local farmers resulting in higher income, improved livelihood and quality of life
4
• China’s strong urbanisation has led to diets switching from grain to meat products
• Government support to agriculture indicate that policymakers emphasise the rural economy and food
security
• The organic, high-quality food segment is enjoying strong demand due to general Chinese food safety
problems
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• SIAF is a key supplier of high quality natural/organic food as China is experiencing limited
arable land acreage and in turn limited food supply and food safety issues
– Strategy to deliver quality assured, organic food through control of the value chain by
using healthy feed and sound scientific rearing methods
– Subsidiary SJAP is expected to be granted the Dragon Head Enterprise Status in
2014 due to strong corporate leadership within Agribusiness
Sino Agro Food’s (”SIAF”) Contribution to China’s Development
Employment
Creation
4 74 47
49 152 68
255 192 0
128 192 47
Increase of
farmer income
and
agricultural
yield
Mitigating food
supply and
safety
problems in
China
• SIAF Group today employs 450 individuals with a total of 495 projected employees at
subsidiary SJAP in Qinghai Province by 2015
Sustainable
Organic
Agriculture &
Aquaculture
• SIAF is an established producer of high quality organic(1) beef and seafood in China
– Patented formulas enhance Organic Fertilizer and Livestock Feed production
resulting in more efficient rearing and healthier cattle
• Leading supplier of modern Indoor RAS(2) producing fish and prawns
– Free from use of antibiotics with minimal water usage; need less than 50% of fish
feed compared to open dam farming and less use of land/ water area
5
• SIAF’s modern cooperative approach to agriculture promote farmer productivity, income
and wealth
– Improvement in economies of scale, usage of patented Silage and Fertilizer
fermentation enzymes and the mechanization of agriculture machinery has increased
local farmer income between 30% to 60%
(1) Defined as raised per animal health and welfare standards; Fed organic feed and Managed without antibiotics and added growth hormones
(2) Recirculating Aquaculture Systems
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Agenda
6
1. Executive Summary
2. Company Overview
3. Financial Review
4. Industry Overview
5. Appendix
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History and the Company’s Five-Year Plan
Company History Five-Year Plan
2007
• Acquires first Joint Venture
company in China which
operates a dairy farm
2012
• Continued value chain
integration with expansion
and continuation of primary
production activities
• Development of wholesale
operations and distribution
network
• Identification of retail
operations suitable for
acquisition
2011
• Expansion of primary
production capacity in
feedstock, fertilizer, fishery
and cattle farming and
linkage to wholesale
operations under
development 2010
• Begins stocking fish in Fish
Farm One
• Divestiture of Dairy Subsidiary
2009
• Acqusition of the HU Plantation
in Guangdong & Beef Cattle
farm in Qinghai
• Started construction of Fish
Farm One
• SIAF’s Five-Year Plan (2010-15) was initiated in 2010 as a result of a strategic
review that resulted in the divestiture of the Company’s Dairy Division in
December 2009 due to an unhealthy dairy industry environment controlled by a
few big value-added processors
The Five-Year Plan is based on:
• Developing integrated operations in
– Cattle fattening with above-average product yield and beef taste with B2B
and B2C distribution
– Aquaculture cultivation of fish , prawn and related products due to that
these products
o Can be marketed as branded high margin quality products
o Enables a vertically integrated business model in the food value chain
with proprietary technology using turnkey solutions providing efficient
production facilities linked to SIAF’s distribution system
• The belief that revenues and margins can be substantially increased by
implementing a growth strategy focussing on
– Integrated Fishery and Beef operations matching SIAF’s farm to plate
concept
– Marketing proprietary brands of high quality, healthy, natural and organic
products at the right prices, right timing and right market places
• Key value driver is low dependency of intermediaries in the distribution of
fishery and beef products in order to capture additional margin
1
2
7
2006
• Initiates business activity in
China
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16 1622
41
52
139
260
2007A 2008A 2009A 2010A 2011A 2012A 2013B
• Rising prices of produced goods, aggressive production capacity expansion and focus on high-growth
niche markets has resulted in significant revenue growth
• Food Product sales revenue are overtaking Consulting Services revenue as production facilities ramp up
with full integration evolving in 2014/15
16 16
22
41
52
139
260
2007A 2008A 2009A 2010A 2011A 2012A 2013E
Group Revenue Development Since Inception
Group Revenue 2007 – 2013B (USDm)
8
Implementation of Company 5-Year Plan (2010-15) focussing
on Beef Cattle and Aquaculture
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2024
30
41 40 37
4752
65
83
111
139
178
207
51%
47%52%
52% 52%54%
47%
41% 40% 41%
46% 46%
36% 37%
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Revenue EBITDA Margin
• Revenue ramp up initiated in H2 2012 due to additional sales of Fish, more efficient Cattle rearing, startup
of Fertilizer sales, billing of Wholesale Centers, Prawn and Cattle farm construction contracts and initiation
of distribution activities
• Above peer margins due to sale of premium products and cost-efficient production
• Gradual decline in margin since Q4 2012 due to introduction of volume based lower margin wholesaling
and retailing activities
Group Revenue & EBITDA Margin Development
LTM Group Revenue & EBITDA Q1 2010 – Q2 2013 (USDm)
9
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4049
57
68
81
95
106
118125
139
166
189
210
231
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
• The Company has grown its Net Tangible Assets to US$231m representing a 71% CAGR since 2010 in
order to establish operations and build its assets base
• Internally generated funds have financed over 80% of 2013 Capex to date
• Q1 2013 US$26m of debt was original budgeted which now has decreased to US$16.8m by Q2 due to
stronger than expected operating cash flows
Group Net Tangible Assets
Group Development of Net Tangible Assets Q1 2010 – Q2 2013 (USDm)
10 Note: Net Tangible Assets defined as stockholders equity less intangible assets and non-controlling interest
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146 4 3
38
109
24
1514
18
9
231%
41%
20%
45%
27%
41%45%
2007A 2008A 2009A 2010A 2011A 2012A 2013ECapital expenditure Capital expenditure, financed by equity Capex / Sales
• SIAF funded expansion capex from 2010 to H2 2013 through convertible debt to build production facilities
and integrated business operations
• To minimise future dilution capex financing will be limited to loan or Pre-IPO funding
• Funds raised were used for acquisition of land usage rights, construction of production and operating
facilities and expansion of net working capital
Group Capital Expenditure
Note: Capital expenditure consists of line items “Cash flow from investing activities” and “Stock issued for settlement of debts”. Equity financing is derived
through the increase in line item “Additional Paid in Capital” in the Balance Sheet for each consecutive period
Group capex & capex to sales (USDm)
11
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39%54%
Sino Agro Food Group Operations
Cattle, Organic Fertilizer and
Livestock Feed(3) Dragon Fruit Plantation Recirculating Aquaculture
Group Marketing and Trading Division (1)
12
Note: MT is an abbreviation for Metric Tonnes
(1) Also referred to as the Corporate (or SIAF) Division
(2) LTM
(3) Consists of the reporting segments Beef Cattle Farm, Cattle Farm and Organic Fertilizer
Sh
are
of
Gro
up
reve
nu
es
Gross
Profit
Margin (2) 44% 57% 40%
Pro
duction
2013E
• Sleepy Cod & Eel
• Prawn
• Reared Beef Cattle
• Organic Fertilizer
• Livestock Feed
• Fresh Flowers
• Dried Flowers
Div
isio
n
Pro
ducts
#8,100
60,000 MT
37,000 MT
1500 MT
450 MT
1500 MT
800 MT
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Group Geographic Footprint
Beef Cattle Division Qinghai Province, Xining City Operations:
• Beef Cattle farming
• Organic Fertilizer production
• Livestock Feed production
SIAF Subsidiary:
• Qinghai SanJiang A Power Agriculture
(SJAP)
Beef Cattle Division Hunan Province, Linli District Operations:
• Beef Cattle farming
• Mixed Fertilizer
SIAF Subsidiary:
• Hunan Shenghua A Power Agriculture
(HSA)
Fishery,Beef Cattle, HU- Plantation
& Corporate Divisions In & around Enping, Guangdong Province Operations:
• Corporate HQ
• Fish production
• Prawn production
• Beef Cattle farming
• Dragon Fruit (Hylocereus Undatus) Plantation
• Wholesale Centers
• Restaurants
SIAF Subsidiaries:
• 5 subsidiaries
SIAF’s principal areas of operation are in the Guangdong, Qinghai and
Hunan provinces of China respectively
13
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• In order to maximize growth and sustainable high margins, SIAF pursues a vertical integration strategy that limit the middlemen at
point of distribution. This consists of:
(1) Selling Fishery and Beef products directly from producing farms to end consumers (farm to plate)
(2) Marketing proprietary brands of healthy, high quality, organic products to niche segments at the right prices
• Integration of down-stream, middle-stream, and up-stream activities into full modules across Fishery and Beef operations are key
to success
Vertically Integrated Growth Strategy
Downstream Midstream Upstream
improve quality & quantity of income
through refinement of operations and
supply ofraw material
Production of quality assured organic
food
Expand income of midstream and
provide financing for downstream
activities
Activity level
Activity Type Production Support Food Production
Purpose
SIAF
Activities
• Aquaculture R&D
• Securing supply of young cattle
• Development and education of
manufacturers and suppliers
• Development of personnel who
have the abilities to liaise with the
government officials
• Food Production & Project
Development
• Operations & Project
Development of Marketing and
Distribution Network
• Enhancement of the value added
processing network
• Treatment and recycling of cattle
and fishery waste
Marketing, Sales, Environmental &
Processing
Food Value Chain
1
2
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1st Operating Model – Joint Ventures
• A cornerstone in SIAF’s funding of projects is the use of Joint Ventures (JV) with targeted Chinese investors. This reduces capex
requirements, gives more operational flexibility to execute SIAF’s long term business plan, and gives access to Government
granted financial assistance not usually given to a 100% foreign owned Company
• SIAF’s JVs are in the form of a Sino Foreign Joint Venture (SJVC) arrangement under Chinese laws and complies with China’s
joint venture requirements, which specifies that the Chinese investor will ultimately not own less than 25% equity interest
• To date SIAF have completed four SJVC’s in China and with five SJVC project company applications pending regulatory
approval
• Prospective investors visit established
Company farms and see the successful
execution and outcome of prior projects
• Before establishment of Company farms in
China projects where promoted to Chinese
Investors by showcasing farms that were
built by the Company founder and
directors in Malaysia and Australia
• SJVC agreements are executed
with Chinese investors for project
delivery under a turnkey delivery
concept. The Company executes a
Consulting and Service Contract to
develop facilities using in-house
engineering, technology and
project management resources as
well as executing sales and
marketing of products and related
services
• Services to the JV Project Company
include
– Supplies of the Company’s
designed and configured plants
and equipment
– Marketing and sales of the end
product
– R&D on grown animals
– Supplies of foundation animals
(baby calves, fingerling and
breeding stocks etc.)
Attracting the JV Partner Formation of the JV Setup of the ownership structure
15
• The Company normally
steps up ownership to
75% of the JV
• Main source of revenue
from the project before
business operations
starts to generate income
and prior to Company
ownership increase is
derived from
management fees and
sales commission fees as
its marketing and sales
agent
The Sino Agro Food JV lifecycle
A
B
Ownership increase 1 2 3 4
• The Company pay for its respective share of construction
capital expenditures and associated costs up front as well
as during the course of the project
• Formation of the SJVC is applied for from day one when the
relevant project have been agreed upon
• Executed JVs are: SJAP, HAS and JHST
• The Chinese investor acts as financial sponsor and
contribute land. The Company is the consultant and project
management service provider
• The SJVC agreement typically has a condition that gives the
option to acquire up to 75% equity interest from the Chinese
JV investor at a cost of total net assets
• This deal structure is beneficial as there is an option to
acquire additional stakes after evaluating project viability
and cash flows, which gives the Company financial
headroom for optimal capital allocation
• Executed JVs are: JHMC and JFD
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2nd Operating Model - Cooperative Farming
• The Cooperative Farming model is built on Agribusiness projects with strong growth potential linked to Chinese farmers who lack commercial scale in
order for them to benefit from a strategic alliance with SIAF to sell cattle for fattening until slaughter at agreed prices
– The model ensures that SIAF’s farms has a stable supply of young cattle to feed until slaughter ensuring efficient and low-cost production
– SIAF work with local government in developing the farmer cooperatives that in turn promotes private ownership
An assessment of regional farmer’s capability to grow crops and pastures
for the Company as nominated contractors using Company land is made
– The land is either leased to the Company free of rent by the local
government or by using the farmer’s own land who in turn use the
Company’s plants and equipment for their planting and harvesting
– The Company provides the farmers with supervision, seeds and
organic fertilizer on credit terms offset by the crops and pastures
that the Company purchase from the farmers
The Company employs the same
concept in the breeding of cattle in which
the farmer work as contractor using the
Company’s bulk livestock feed on credit
terms
– The farmer’s debt is later offsets
by the amount of mature cattle he
sells to the Company
The company buys the cattle at 6-8 months
age from the farmer and then fattens the cattle
during an additional 6-10 months
When the cattle is mature it is slaughtered and
deboned in the Company’s facilities(1)
The ultimate purpose is to have control of the
whole value chain and obtain organically
reared cattle which enables production of
Organic beef products on a commercial scale
basis
Cultivation of Crops Rearing of cattle Fattening, processing and sale
16
3
(1) The Company’s slaughterhouse and deboning facilties is currently under construction and is expected to commence operations durong Q1 2014
2 1
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Proprietary Technologies
APRAS
Livestock
Indoor
Growing
System
Fishery
Livestock
Semi-free
ranging
Growing
System
• A Power Re-circulation Aquaculture Systems and Technology (APRAS)
• Greater productivity, sustainability and cost-effectiveness compared to existing open dam
systems in China
• Produces pollution-free fish, eels and prawn on commercial scale under controlled
conditions eliminating seasonal variations, antibiotics and chemicals
• A core SIAF competetive advantage is its forte in Design, Construction, Engineering, Development & Consulting
Services linked with its JV partners in the development of integrated farms and related facilities
– SIAF employ leading-edge proprietary technologies in Beef Cattle, Aquacutlure and Livestock farming including key
patents and licensing rights that have been acquired or developed with its JV partners
Segment Technology
17
Aromatic Feed
Bulk Livestock Feed
Pure organic mixed
fertilizer
Beef Cattle
Farm
SJAP
Organic Fertilizer
Bulk Livestock Feed Enzyme(1) 2
Enzyme 1 Cattle Farm
HSA
Concentrated Livestock
Feed (CLSF)
Beef Cattle
Farm
SJAP
Cattle Farm
MEIJI
Aromatic Feed
Formula
CLSF Formula
End product
Sleepy Cod
Flower Pattern Eel
Prawns
• Rearing of cattle and sheep in locations with cold climates
• The patented Concentrated Livestock Feed (CLSF) enables production cost savings as the
exact amount of concentrated feed is distributed, avoiding excess feed being wasted on
over feeding, avoiding fat content
• Aromatic Feed that shortens the fattening cycle with significantly less fat content in the
meat
• Cattle exhibit better growth rates and are healthier with tender meat that have an aromatic
flavour
• The Aromatic Feed Formula license was acquired for 1.5 $USm in 2012
• Used for the manufacturing of Organic Fertilizer and Bulk Livestock Feed by SJAP
• Bulk Livestock Feed is produced through fermentation of crop waste material into silage
• Suitable to apply at colder climate countries
• Patent and brand was acquired for US$8m in 2008
• Acquired from third party and is used in Cattle Farm 1 to produce livestock feed and for the
production of 100% pure organic mixed fertilizer at the Company’s HSA facility
(1) Branded and registered under the name “Bacterial and Bio-organic Fertilizer Manufacturing Technology”
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Group Division Overview
Beef Cattle
Farm
Division
Cattle
Division
HU
Plantation
Division
Fishery
Division
Marketing
and Trading
Division(1)
1 2 3 4 5
18 (1) Also referred to as the Corporate (or SIAF) Division
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Beef Cattle
Farm
Cattle Farm
Fertilizer (Part
of Beef Cattle
Farm)
Plantation
Fishery
Group Revenue Development per Division
Dairy (discontinued)
• Revenue ramp up started in H2 2012 mainly due to increased contract services in Wholesale Centers,
Prawn and Cattlefarm development contracts, additional sale of fish, increased cattle rearing
productivity, startup of fertilizer sales and initiation of marketing, distribution, and retail activities
• Decline in Fishery revenue mainly due to reallocation of revenue to Marketing and Trading segment and
lower prices
Revenue split per division Q1 2010 – Q2 2013 (USDm)
19
Marketing and
Trading
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Fishery; 54%
1 4
26
86
93%74%
42%
54%
2009 2010 2011 2012
Revenue Gross Profit margin
• The Fishery is the largest Division and operates by using the Company’s
proprietary “A Power Re-circulation Aquaculture Systems and Technology”
(APRAS). The APRAS provides greater productivity, sustainability and cost-
effectiveness compared to existing competing open dam systems in China
• The Division consists of the fully owned subsidiary Capital Award’s business
operations which are divided into:
Engineering, Technology & Consulting Services
Provides a holistic and full range of services in the field of aquaculture
covering research and development, brood stocks and nurturing of fish
fingerlings and prawn flies, growth of fish and prawns, engineering
designs and planning of farms
SIAF currently manages six (6) consulting and servicing
contracts:
– Fish Farm 1 – Completed March 2011, produced 600 metric tons of fish in
2012
– Fish Farm 2 – Construction to start Q3 2013
– Prawn Farm 1 – Completed January 2013
– Prawn Farm 2 – Phase 1 & 2 to be complete H2 2013
– Prawn Farm 3 - Schedule dependent on regulatory approval
– Wholesale Center – Completed Q1 2013(1)
Marketing and sales of live seafood
Capital Award is the sole marketing and distribution agent for the sales and
purchase of live seafood of all fishery farms developed or to be developed by
Capital Award in China
Fishery Division (1/4)
Share of Group Sales Overview
Financial Development
Revenue & Margin 2009-2012 (USDm)
LTM Sales (USDm)
109
(1) Work still in progress for live-seafood section
1
1
2
20
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21
Seafood Production Through Recirculating Aquaculture (2/4)
• Since 1980's Chinese aquaculture has been growing
dramatically and today accounts for ~70% of global
aquaculture production. This rapid expansion has resulted in
detrimental/ negative effects on the coastal environment and
the economics of fish farming in China, namely
– High incidence of pollution - employment of large doses of
antibiotic feed additives
– Strain on water supply due to significant water usage
– Open dam farms occupy large areas of fertile land that
otherwise could be used for cultivation of crops
– negative conditions for open dam farming resulting in low
feed to fish conversion ratios
• SIAF’s A Power Recirculating Aquaculture System and
Technology (APRAS) mitigates these negative issues in a
profitable and sustainable manner
• SIAF is a proven market leader in Recirculating Aquaculture
Systems (RAS) in China. SIAF currently operates 3 APRAS
fish and prawn farms with a total budgeted production of 3,100
MT of fish and prawn in 2014 with additional projects in
pipeline
– RAS is a proven technology employed in Europe and
Australia for over 30 years but not previously in China
• Existing Chinese open dam aquaculture is outdated giving
SIAF distinct advantages both in the sales of aquatic and
aquaculture project development
Cultivated Species
Benchmarking of SIAF’s APRAS to conventional
Chinese Open Dam Farming
Western White Shrimp
Freshwater Prawns
Sleepy Cod Flower Pattern Eels
Item APRASConventional Open
Dam
Labour requirement p.a. 1 worker per 50 MT 1 worker per 6 MT
Dam water usage Water recycled Changed every year
Energy requirement2.5% of production
costNo specified records
Harvesting All year round Once or twice p.a.
Subject to seasonal variation No Yes
Subject to disease No Yes
Use of antibiotics and chem No Yes
Mortality rate 8% or less Above 25%
Feed to fish conversion rate 2:1 4.5:1
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Case Study: Fish Farm 1 (3/4) • In 2010, SIAF executed a service and consulting contract for “Fish Farm 1” with a group of Chinese investors through
the Foreign Sino Joint Venture (FSJC) Company Model
• Company subsidiary Capital Award supplied plant and equipment and provided Consulting Services for installation,
construction and management
Planning & Construction Formation of SJVC
January 2010
Fish sales start
August 2011
Fully ramped-up operations
2012
• Parties form a Sino-foreign Joint
Venture company
• Capital Award acquire 25% of the
JV + option to acquire up to 75% at
a later stage
• Capital Award provided services
amounting to ~US$3.5m which
included APT sub-license fees, part
of plant and equipment costs,
installation, supervision and
consultancy, and other services
• The JV partner funds capital
development, generating initial
revenues for the Company
• Fish species to be grown is
decided to be Sleepy Cod
• Sleepy Cod have attractive
niche markets in local Chinese
markets and other Asian
markets
• Fish is sold live to local
wholesalers that pick up the fish
at the fish farm - eliminating
concerns with delivery and
logistics
• H1 2011 the fish
farm is stocked with
>120,000 fingerlings
and fish stock of
various sizes
• In August 2011 the
fish farm start
generating fish sale
revenues
• 600 tons of fish sold in 2012
• Ramped-up operations generated
revenues of $86.3m 2012 with a net
income of $39.2m in 2012
• Capital Award supplies fish and fingerling
stocks and in turn generates revenues by
buying fish produced by the farm and
reselling to wholesalers
• Total financing from the JV Partner
amount to US$5.1m
• In June 2012 Capital Award exercised its
option in line with the JV agreement and
increased ownership to 75% equity
interest
May 2010
22
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Selection of SIAF’s Aquatic Farms (4/4)
23
Grow-out tanks, Fish Farm 1 (FF1)
Grow-out tanks, Prawn Farm 1
Sleepy Cod resting pipes in grow-out tanks, FF1
Hatchery and Nursery grow-out, Prawn Farm 2
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Beef Cattle Farm; 25%
0 2
15
23
57%
54%
30%
2009 2010 2011 2012
Revenue Gross Profit margin
Beef Cattle Farm Division (1/2)
Share of Group Sales Overview
Financial Development
• The Beef Cattle Farm Division consists of two operations spread over two
provinces in China:
Qinghai SanJiang A Power Agriculture (SJAP)
• Located in Qinghai Province, SJAP is a majority owned subsidiary incorporated in
2009
– The Company’s JV partner is one of China’s largest state owned agriculture
companies – SanJiang Agriculture with >US$4.4bn in assets and >35,000
employees
• Principal activities are:
– Manufacturing and sales of Organic Fertilizer
– Manufacturing and sales of Livestock Feed and Concentrated livestock feed
– Rearing and sales of Beef Cattle
• Principal operations with startup 2014:
– Value-added processing
o Slaughterhouse
o De-boning and packaging
– Manufacturing of Enzyme
– Mashgas station for generation of electricity
Hunan Shenghua A Power Agriculture (HSA)
• Located in Hunan Province, HSA is a 76% owned subsidiary
• Principal activities are
– Manufacturing and sales of Organic and Mixed Fertilizer
– Cultivation of pastures and crops in preparation for establishment of a beef
cattle farm
• HSA is targeting to produce up to 30,000 MT of organic fertilizer in 2013 in the
newly completed production plant aiming to increase capacity to ~90,000 MT/year
in stages by 2015 subject to sales performance
Revenue & Margin 2009-2012 (USDm)
49
2
LTM Sales (USDm)
24
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95,000
Head of Cattle
and Sheep
• SIAF cultivates 2,600 hectares of pasture together with affiliated farmers to produce pasture and silage
– The affiliated farmers cultivate the pasture with machinery and equipment provided by SIAF
• Fermentation Enzyme patent was acquired for US$8m in 2008
– Fermentation enzyme specifically engineered for colder climate fermentation
– Increases protein content, digestibility and preservation of feed quality
• 70% of feed production used for SIAF’s and the affiliated farmers’ cattle with remainder sold regionally
Beef Cattle Farm Division Products (2/4)
Organic
Fertilizer
• SIAF buys 6 to 10 month old beef cattle which is fattened in SIAF’s facilities or by affiliated farmers at their own farms
for a further 8 to 12 months until they are mature for slaughter
• The Cattle is then sold live to regional wholesalers. in Q1 2014 all beef cattle will be slaughtered at SIAF’s meat
processing facilities as abattoir construction will be finalised at that time
• Cattle are primarily of Simmental, Charolais, and Angus breed
Product / Process
25
Description
• Manufactured using locally sourced manure which is then fermented by an enzyme developed by SIAF
• 90% of production is used on SIAF’s and affiliated farmers’ pastures with the remainder sold to regional customers
Silage
Concentrated
livestock feed
(CLSF)
Rearing of
beef
cattle
Abattoir for
meat
processing
• CLSF is a patented nutritional complement to SIAF’s Silage and provide the local cattle and sheep farms with a unique
type of feed that cater to the growth of the animal throughout the different growing cycles
• Enables production cost savings as the exact amount of concentrated feed is distributed, avoiding excess feed being
wasted on overfeeding which results in worthless fat content
• Local Government reserves the production of 5,000 MT / year to the Federal Emergency Feed Reserve
• Customer mix similar to that of Silage
• Construction currently underway with completion targeted Q1 2014 of an abattoir and packaging facility with a total
capacity in 2015 to:
– Slaughter 50,000 heads of cattle and 150,000 heads of sheep per year
– Debone and pack up to 20,000 MT of meat / year, equivalent to ~50,000 heads of cattle
• Sino Agro Food’s Abattoir Operation Permit is the 1st and so far only permit granted by the Local Government to a
private entity in the Qinghai Province
Production
Capacity 2014B
100,000
MT
60,000
MT
30,000
MT
12,000
Head of
Cattle(1)
(1) Of which 50% is reared by SIAF’s affiliated farmers
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SIAF Cooperate with Local Farmers in the Rearing of Beef Cattle (3/4)
Cooperative Beef
Cattle Production
26
1. SIAF Process raw material into Organic Fertilizer
and Silage • The Company processes raw material into Organic
Fertilizer and Silage through patented cold-weather
fermentation enzymes
– Internally and externally sourced manure is processed
into Organic Fertilizer at SIAF’s facilities
–Crops are fermented into Silage
–Crops are processed into Concentrated Livestock Feed
(“CLSF”)
2. Sale of products to local farmers at discounted
prices • The Organic Fertilizer, Silage and CLSF are sold at a
discount to farmers working on the Company’s land-use
rights(1) which SIAF lease free of charge by the local
Government
–The Qinghai Provincial Government is very keen to
improve the welfare of rural farmers and thus promote
SIAF’s operations through rental-free arrangements
due to the resulting farmer income increase
3. Farmers rear young cattle and cultivate land using
SIAF’s products resulting in improved yields • Farmers employ the Organic Fertilizer, Silage and CLSF on
their own land and cattle. Compared to previously used
local products the cattle experience:
–Additional average weight gain per head of fattening cattle
– Improved digestion of feed resulting in a cleaner
environment
–Lower prevalence of sickness
4. SIAF acquires young cattle from local farmers at a
discount and fattens the cattle until slaughter
• Young cattle is acquired at ~6 months of age. Due to the
discounted price of feed and fertilizer sold to the farmer, the
Company also acquires the young cattle at a discount –
reducing capital strained local farmers NWC
–The young cattle is fed with the Company’s Feed and CLSF
–The cattle produces manure that is used for Organic
Fertilizer production
26 (1) Private ownership of agricultural land is not permitted in the PRC. Instead, individuals and companies lease land from the government.
26
1
2 3
4
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Beef Cattle Farm Division in Images (4/4)
Baling of silage
Beef Cattle in SIAF’s cattle houses Feeding of SIAF’s beef cattle
SIAF’s Concentrated Livestock Feed products
27
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Cattle; 14%
0 0
4
17
40%
55%
2009 2010 2011 2012
Revenue Gross Profit margin
Guangdong Province Cattle Division
Share of Group Sales Overview
Financial Development
• This Division refers to the fully owned subsidiary MEIJI’s
business operations of Cattle Farms 1 and 2 in the Guangdong
Province with revenues generated from
– Engineering and technology services which is the provision
of development, construction and operations consulting to the
JV’s
– Marketing and sales of Cattle Consisting of purchase and
sale from the Cattle JV to the wholesale market. MEIJI is the
sole marketing and distribution agent for the farms developed
by MEIJI
• 2013 Targeted sales from Cattle Farm 1 amount to 1,000 head of
cattle. Cattle Farm 2 operations are targeted to begin by end
2013 Revenue & Margin 2009-2012 (USDm)
LTM Sales (USDm)
29
3
28
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HU Plantation;
7%
3
5
6
12
72%61%
66% 58%
2009 2010 2011 2012
Revenue Gross Profit margin
HU Plantation Division
Share of Group Sales Overview
Financial Development
• Consists of 187 cultivated acres of Hylocereus Undatus (Dragon
Fruit Flowers) in the Guangdong Province
• Dragon Fruit cacti take three years to reach full maturity, and
thereafter produce up to 20 years
• The plantation was developed in 2008 with revenues generated
since year 2009
• Two types of operations
– Growth and sales of flowers consumed as vegetables
– Drying and value added processing and sales of HU flower
products which are used in health-related soups and teas
Revenue & margin 2007-2012 (USDm)
13
4
LTM Sales (USDm)
29
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Corporate (or SIAF) Division
Company Distribution activities Overview
• In order to maximise growth and sustain high margins, the company is actively
integrating into Retail and Wholesale activities in order to accomplish vertical
integration in the food value chain. All end-market operations are located in
Guangzhou, China’s third largest city with >12 million residents
• Wholesale Center 2 Development project that include design, construction
and project management of a specialist modern beef wholesale and
distribution center. Current capacity to store up to 150 MT of frozen food
• Central Kitchen Development project that includes design, construction,
project management and management of a Central Kitchen, a Central Bakery,
a fast food restaurant and 3 mobile food stores situated adjacent to Wholesale
Center 2. Work started in November 2012, and to date about 50% of the
construction work is completed
• Restaurants Development project that includes design, construction, project
management and management of two new gourmet restaurants situated in
Guangzhou City. Two restaurants are already in operation, with a development
and construction contract of a total of 50 Restaurants in negotiation
• Trading Complex. The construction of a trading complex for Import and
Export trading of seafood in a building adjacent to Wholesale Centers 1 and 2
– The Company has recently established operations in Madagascar with live
fish tanks and packaging and holding facilities in order to receive and pack
live seafood for export to China
5
Wholesale warehouse
Live fish display tanks at Wholesale Center 1
30
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Management Team • Management team has significant experience in the aquaculture and food industry with an aggregate industry
experience surpassing seventy years
• Management team has worked together for the last six years in both Malaysia and China
• No mainland Chinese management members result in an essentially foreign controlled company with no
influence of Chinese corporate governance culture
Solomon Lee Founder, CEO and Chairman of the Board of Directors
• Director and CEO since 2006
• >45 years of business and project development experience. Group Managing Director of Capital Award since 2004 to date. CEO of Irama Edaran
Sdn. Bhd. (Malaysia), a modern aquaculture developer 1993 - 2004
• Chairman of the Company’s Board of Directors
• Citizen of Australia and received a B.A. Major in Accounting and Economics from Monash University, Australia in July 1972
Tan Paoy Teik Chief Marketing Officer and Director
• Director and the Chief Marketing Officer since August 2007
• Group Managing Director of Milux Corporation Bhd. (Malaysia), a manufacturer of home and gas appliances Since 2005
• Over 28 yearsof experience in the food industry
• Director in the Company’s Board of Directors
• Citizen of Malaysia and received his MBA from South Pacific University in 2005
Chen Bor Hann Secretary and Director
• Director and Secretary since August 2007
• Director and Business Development Manager of Capital Award Since 2004
• Fishery Supervisor of Irama Edaran Sdn. Bhd. (Malaysia) 1995 to 2004
• Citizen of Taiwan
31
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Yap Koi Ming (George) Independent Director
• Mr. Yap has been an Independent Director of the Company since January 1, 2013.
• He was appointed the Chairman of the Audit Committee of the Company as of February 1, 2013.
• He is a practicing international chartered accountant with over 30 years standing and is a practicing member of The Institute of Chartered
Accountants in England and Wales since 1984
• His international experience has covered Australia-NZ, United Kingdom- Europe, Malaysia, the ASEAN, China and Hong Kong
• Mr. Yap is the managing principal of K M Yap & Company, a sole proprietary firm of Chartered Accountancy in NSW, Sydney
• He has been managing director of Brenna Investments Pty Ltd. since 1998 and has held the position of Public Interest Director (non-executive) for
the Federation of Investment Managers Malaysia, in Malaysia 2010- July 25, 2013
• Mr. Yap is a citizen of Malaysia
• Mr. Yap specializes in strategic corporate finance solutions, business plans, registering listings on stock exchanges, international banking, financial
management, risk management, financial reporting, auditing, financial management and investment management
Independent Directors
As of January 1st 2013 the Company designated two Independent Directors to the Company’s
Board of Directors. The purpose of the appointments was to add valuable human capital to
Company management and improve Corporate Governance
Nils-Erik Sandberg Independent Director
• Mr. Sandberg has been an Independent Director of the Company since January 1, 2013
• He was appointed the Chairman of the Compensation Committee of the Company as of February 1, 2013
• He is President of the Jordan Fund, a Swedish investment group network since 1990
• Mr. Sandberg currently holds a position as adviser for Gustavia Energy and Commodities Fund since 2008
• Mr. Sandberg was the founder and served as CEO of Hydrocarbon International HCI AB, a publicly traded Swedish oil Company, from 1986 to 1993.
Mr. Sandberg was the founder and served as CEO of Grauten Oil AB, a publicly traded Swedish oil company, from 1986 to 1993. Mr. Sandberg was
a director of International Petroleum Corporation, predecessor of Lundin Oil, later Lundin Petroleum
• Mr. Sandberg is a citizen of Sweden
32
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Agenda
33
1. Executive Summary
2. Company Overview
3. Financial Review
4. Industry Overview
5. Appendix
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Existing debt
New debt
Non-interest bearing liabilities
Equity
Equity & liabilities
Other assets
Other property and equipment
Land Use Rights
Other current assets
Accounts receivable
Cash
Assets
Balance Sheet
34
Comments Balance sheet
Note: 2013 Q2 balance sheet used for all calculations
(2) • Conservative company capital structure
– Net Cash position
– Equity Ratio of 90%
• The Company has a prudent financing policy with a
conservative approach to debt financing and has
historically preferred equity financing
• Generous credit terms to farmers and wholesalers of
fish make up a large portion of accounts receivable
• The majority of other current assets consist of deposits
and prepaid expenses related to JV project construction
• Company Land use rights (LUR) of 248 hectares valued
to US$55m
– LURs represent acquisition of rights to agricultural
land as private ownership of agricultural land is not
permitted in China
– Land use rights valued at acquisition cost
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Income Statement
35
Income Statement and Key Ratios
(2) • Management expects topline growth to decline to more
moderate levels going forward
– Larger share of revenue in 2012 and LTM derived
from product sales as opposed to consulting revenue
– Consulting revenue as share of total revenue has
declined and expected to decline further to stabilize
at a level of 20% of sales with remainder of revenue
consisting of product sales
• Gross profit margin decline LTM due to introduction of
wholesaling activities which naturally is a lower margin
segment
US$m 2009 2010 2011 2012 LTM
Sales 22 41 52 139 207
COGS (9) (9) (9) (66) (117)
Gross Profit 14 24 26 72 89
SG&A (3) (4) (5) (8) (7)
EBITDA 11 21 21 64 82
Depreciation (1) (1) (0) (0) (1)
Amortiziation (1) (1) (1) (2) (2)
EBIT 9 19 20 61 80
Gain (loss) of
extinguishment of debts0 (6) 1 2 2
Other Income 0 0 0 0 0
Interest Expense (0) (0) (0) (0) (0)
Taxes 0 0 0 0 0
Net Income 9 13 21 63 81
Key Ratios
Sales Growth n.a. 87% 28% 167% 49%
Gross profit Margin 65% 60% 50% 52% 43%
EBITDA Margin 51% 51% 40% 46% 40%
Net Margin 42% 31% 41% 46% 39%
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Agenda
36
1. Executive Summary
2. Company Overview
3. Financial Review
4. Industry Overview
5. Appendix
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1) OECD Economic Outlook No. 92 (database) / OECD economic surveys: China 2013
2) The World Bank; China 2030, Building a Modern, Harmonious, and Creative Society, 2013
3) USITC: China’s Agricultural Trade: Competitive Conditions and Effects on U.S. Exports, March 2011
4) USDA’s GAIN Report Number: CH12073 per 12/28/2012
5) The State of World Fisheries and Aquaculture 2012, FAO
6) China and Hong Kong: Food Opportunities for Maine, March 2012
7) Rabobank
8) Frost & Sullivan: China’s beef market has great growth potential
9) Fertilizers in China, Freedonia Group; June 2012
Industry Overview
Economic
outlook in China
Agriculture in
China(3)
The market for
aquatic and
aquaculture in
China(4)
The market for
beef and meat in
China
The market for
fertilizer in
China(9)
• The OECD expects that China’s real GDP will grow by 8.5% in 2013 and by 8.9% in 2014(1)
• The strong growth in China has delivered major improvements in living standards and poverty has been reduced dramatically recently with
China graduating from lower to upper middle-income status(2)
• Agricultural employment has been falling for a decade at an average rate of 3.5% annually, with massive migration from the countryside to
cities. Continuing migration of workers out of agriculture is expected to help boost farming profitability, leading to further gains from
mechanisation(1)
1
• China is the world’s largest agricultural economy
• About 40% of China’s population is employed in the agricultural sector, and agriculture contributes ~11% to China’s GDP
• Food is the largest class of household expenditure for all Chinese income groups
• Government support to the agricultural sector indicates that policymakers are placing a renewed emphasis on the rural economy
• Higher incomes are leading to changing food preferences, including the demand for better quality and safer foods
• China is the world’s largest aquatic producer and its market share has risen from 7% in 1961 to 35% by 2010(5)
• China is the world largest aquaculture producer with total cultured aquatic production accounting for ~70% of world total
• Prices for aquatic products are expected to grow in 2013 due to increases in the price of feed and other inputs
• Development of processing, distribution and improved consumer affluence boosts demand for more diversified diets, including seafood
• Demand has increased for imported frozen aquatic products commonly available in supermarkets
– Product identification such as brands and country of origin are important tools to attract consumer interest
• By 2015 total meat output is estimated to 85 million tons, of which ~63% is pork(6)
• Since 2007 China has gradually turned into a net importer of meats from previously maintaining self-sufficiency in meat (6)
• Beef consumption has risen steadily over the last few years; rising incomes, dietary shift and urbanization are key drivers
– Beef consumption is expected to rise by 24% per capita in the coming decade
– Beef is a niche product in China accounting for only 8% of per capita meat consumption(7)(8)
• Further regulation of China's beef industry will likely ensure sufficient supply of cattle and promote beef industry development(8)
• Demand for fertilizer in China is forecast to increase 3.3% per annum through 2015
• Fertilizer sales is expected to be supported by an expansion of agricultural activities as sown acreage continues to grow and rural income levels
rise
• Subsidies aimed directly at cutting the cost of fertilizers is expected to encourage additional use
2
3
4
5
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-2,0
0,0
2,0
4,0
6,0
8,0
10,0
2012A 2013E 2014E
Euro Area USA Brazil Russia India China
China’s real GDP growth estimated to 8.5% in 2013 and 8.9% in 2014 with growth during next 10Y
forecasted to average 8%(1)
Economic Outlook in China 1
38
Real GDP growth
(%)
• China’s economy is at present second only to that of the United States, having
overtaken Japan’s role as number two in 2010(2)
– China’s real GDP estimated to grow by 8.5% in 2013 and by 8.9% in
2014(1)
– China is expected to become the worlds’ largest economy in 2017 with
18.3% of the world economy(3)
• The strong growth in China has delivered major improvements in living
standards and poverty has been reduced dramatically(4) Based on World Bank
classification, China recently graduated from lower to upper middle-income
status
– A growing emphasis on improving access to health and education as well
as high investments in infrastructure has spread the benefits of growth
nationally including rural areas, where incomes have enjoyed consistently
strong gains
– Recent simulations suggest that China could maintain high, though
gradually easing, growth during the current decade, averaging 8% in per
capita terms
• The share of the population aged 20 to 64 in the total population is expected to
peak soon, and the elderly dependency ratio will continue to rise, exerting
downward pressure on saving rates
– Agricultural employment has been falling for a decade at an average rate of
3.5% annually, with migration from the countryside to cities. Continuing
migration of workers out of agriculture is expected to boost farming
profitability, leading to gains from more mechanisation
o Consolidation of farms into bigger units may occur provided that the
laws governing the ownership of rural land-use rights are changed to
allow the sale of use-rights and favour the rental market for agricultural
land(5)
1) OECD Economic Outlook No. 92 (database)/OECD economic surveys: China 2013
2) The World Bank; China 2030, Building a Modern, Harmonious, and Creative Society [pages 3, 376-377], 2013
3) IMF, October 2012
4) The World Bank; China 2030, Building a Modern, Harmonious, and Creative Society, 2013 [pages 3, 376-377
5) OECD Economic Surveys China, March 2013 [Pages 20-21]]
Chinese and US share of global GDP
(% of global GDP)
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014E 2016E
China USA
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2nd: 128 192 47
3rd: 4 74 47
Highl: 255 192 0
Text: 83 86 90
New
1st: 123 167 65
2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
0
100
200
300
400
500
600
1984 1989 1994 1999 2004 2009
Agriculture in China (1/2) 2
39
Agriculture in Chinese economy
• China is the world’s largest agricultural economy. It is the leading producer and consumer of many
agricultural commodities such as pork and rice
– China has historically been successful in meeting its rapidly rising demand for food and fiber by
increasing domestic production, but has now emerged as a leading global importer of several
agricultural commodities
• About 40% of China’s population of 1.3 billion is employed in the agricultural sector with agriculture
contributing ~11% to China’s GDP(1)
Government support for agriculture
• The Chinese central government’s current producer and consumer support(2) policy incentivises the
transition from grain self-sufficiency and low consumer prices toward raising farm household incomes,
placing a renewed emphasis on the rural economy
– Indirect support, in the form of general services, is very high relative to similar support programs
in other countries, due largely to investments in agricultural infrastructure
o General services include modern research and extension services, food safety agencies,
and agricultural price information services which provide benefits to producers and
consumers throughout the economy(1)
Agricultural consumption
• China is a major global consumer of agricultural products
• The traditional Chinese diet centers around grains and starches staple foods which account for nearly
one-half of the daily caloric intake
• Chinese food consumption is influenced by factors including population size, demographics, income,
food prices, and general preferences
– Per capita income growth and urbanization are the main factors responsible for altering recent
consumption patterns
o Rising income translates into higher per capita food consumption
o Increasing urbanization is driving diversification of food choices because of greater
availability and choice offered through increasingly diverse sales outlet. Urban diets contain
less grain and more processed non staple food items compared to the rural diet. Rural
migrants to cities tend to adopt the urban diet (1)
Investment into agricultural sector
central government budget support(3)
Per capita food consumption development 1980 - 2009(3)
(Billion Yuan in 2008 prices)
(kg/person)
0
20
40
60
80
100
120
1980 1990 2000 2009Rice Wheat Other grains
0
20
40
60
1980 1990 2000 2009Milk Meat Fish
Government support to the agricultural sector indicates that policymakers are placing a
renewed emphasis on the rural economy
(1) USITC: China’s Agricultural Trade: Competitive Conditions and Effects on U.S. Exports, March 2011 [pages 1-1 and1-8]
(2) OECD: Producer and Consumer Support (PSE) is defined as the estimated monetary value of transfers from consumers and taxpayers to farmers, expressed as a
percentage of gross farm receipts (defined as the value of total farm production at farmgate prices), plus budgetary support
(3) Feeding Growing Food Demand in China , Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences, April 2012
Old
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2nd: 128 192 47
3rd: 4 74 47
Highl: 255 192 0
Text: 83 86 90
New
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2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
Expenditure on food
• Food is the largest class of household expenditure for all Chinese income groups
• Urban residents spend substantially more on food than their rural counterparts
• Higher incomes lead to an increase in both the quantity and quality of food demanded
• Demand for higher quantities of food stabilise in top income households while demand for higher-
quality foods continues to rise with income
• Spending on food consumed outside the home is rising
– Most expenditures are made in restaurants. Although consumption away from the household is
increasing, most foods are still eaten at home. The exception is meat, with about half of all meat
consumed outside the home
Food preferences
• Higher incomes lead to changing food preferences, including demand for better quality, safer and more
varied food
– Income growth and urbanisation is expected to increase demand for a variety of higher quality
foods
• Similar to other developing countries, the traditional Chinese diet comprises mostly of grains and other
starch staples
– Consumption of non-staple, higher-value foods such as meat (especially pork), dairy, fruits,
vegetables, and processed food has grown significantly in the past three decades
o 30% of the food currently consumed in China has been processed in some way
• The Chinese consume about four times as much pork as poultry, the second most popular animal
protein
– Pork consumption has been encouraged by improved cold storage distribution, as the product
can be transported greater distances to reach more customers
– Pork consumption levels are also high due to government support programs, including
purchasing pork for reserves and occasionally subsidizing pork purchases for low-income
consumers
• Food quality and safety are important factors affecting Chinese food preferences
– High income urban groups that focus their expenditure on high-quality products also seek
assurance that their food is safe
– Safety concerns can determine where certain foods are bought: fresh produce is usually
purchased at a wet market because fresher produce is perceived to be safer, while meats are
increasingly bought at a supermarket because of the availability of cold storage(1)
Food; 36%
Clothing; 10%
Residence; 10%
Household Facilities, Articles and Services ; 6%
Healthcare and Medical Services; 7%
Transport & Communications ; 14%
Education, Cultural and Recreation Services; 13%
Miscellanous goods and services ; 4%
Agriculture in China (2/2) 2
40
Average per capita annual expenditure of urban households, 2009(2)
Per capita food consumption in 2009, Urban and Rural split(3)
(kg)
Higher incomes and urbanisation are leading to changing food preferences, including the
demand for better quality and safer foods
0
20
40
60
80
100
120
Rice Wheat Fruits Red meat andpoultry
Milk
Urban Rural
(1) USITC: China’s Agricultural Trade: Competitive Conditions and Effects on U.S. Exports, March 2011 [pages 1-1 and1-8]
(2) China Statistical Yearbook 2011
(3) Feeding Growing Food Demand in China , Jikun Huang Center for Chinese Agricultural Policy Chinese Academy of Sciences, April 2012
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2nd: 128 192 47
3rd: 4 74 47
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Text: 83 86 90
New
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2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
The Market for Aquatic and Aquaculture in China
2,1%
5,6%
4,6%
Wild catch Fish Farming Total Aquatic Production
3
41
• China has the world’s largest aquatic production and its market share has risen from 7% in 1961
to 35% by 2010(1)
Aquaculture
• After China opened up to the outside world in the 1980's, the aquaculture sector has been
growing dramatically, becoming one of the fastest growing agriculture sectors(2)
• China is the world largest aquaculture producer accounting for ~70% of global aquaculture
production
• Aquaculture acreage and investments in production expansion is slowing overall
– Government officials relate that environmental concerns and the rapid
industrialization/urbanization of China’s coastal regions hamper further aquaculture
expansion
• Fish is the most common type of seafood cultivated through aquaculture with a total production
of 22.8 million tons, accounting for 69% of all aquatic fish production in 2011
– Carp remains the most popular cultured freshwater fish accounting for 72% of total
freshwater cultured fish production
Aquatic Consumption
• Development of processing, distribution and improved consumer affluence boosts demand for
more diversified diets, including seafood
• Per capita consumption of aquatic products was 14.6 Kg per urban dweller and 5.4 Kg per rural
inhabitant in 2011
– Per capita consumption is expected to increase steadily, with strong growth potential in the
rural sector
– The per capita consumption of aquatic products is highest in coastal regions, such as
Shanghai and Guangdong, and locations with relatively high disposable income
• Prices for aquatic products are expected to grow in 2013, reflecting increases in the price of feed
and other inputs
Marketing
• Demand has increased for imported frozen aquatic products commonly available in supermarkets
– Product identification such as brands and country of origin are important tools to attract
consumer interest
– With the proper display, high-value imported items can be promoted to customers
– Importers claim high value U.S. seafood products are easy to sell in both first and second tier
cities(3)
CAGR by production method 2008-2011
Consumption Trends for Pork, Beef, Poultry and Mutton in China(4)
,0
5,000
10,000
15,000
20,000
25,000
2009 2010 2011
Other Algae Shrimp, Prawn & Crab Shellfish Fish
• China is the world largest aquaculture producer with production accounting for ~70% of world total
• Prices for aquatic products are expected to grow in 2013 due to increases in the price of feed and other inputs
(1) The State of World Fisheries and Aquaculture 2012, FAO
(2) FAO – National Aquaculture Sector Overview China
(3) USDA’s GAIN Report Number: CH12073 per 12/28/2012
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2nd: 205 220 68
3rd: 123 205 244
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Text: 82 94 82
0
6
12
18
24
30
36
2006 2007 2008 2009 2010 2011
Urban Rural
Asia and Pacific56%
North America8%
Europe6%
Other 4%
Africa 8%
Latin America and Caribbean
18%
S
China is the world’s largest producer and consumer of meat including pork, poultry and beef
with a 27% market share
The Market for Meat in China 4
42
• China is the world’s largest producer and consumer of meat including pork, poultry and beef with
a 27% market share
– 2011 Meat production amounted to 79 million tons consisting of ~63% pork
o 2015 meat production in is targeted to reach 85 million tons, consisting of ~63% pork
according to the Government’s 5-year plan
– Since 2007 China has gradually turned into a net importer of meat from previously
maintaining self-sufficiency in meat(1)
Meat Market Drivers
• Improved consumer purchasing power stimulate the growth of beef markets as beef sells
at premium prices and traditionally goes beyond the population's affordable level
– Rising purchasing power has led to a dietary pattern change switching from consumption of
traditional food grain to an increase in consumption of meat products
– Chinese traditionally employ pork and chicken as meat sources due to beef being considered
expensive
o With the improvement of living standards Chinese have upgraded their meat
consumption to include more beef
– Consumption of red meat is perceived to have higher status than consumption of poultry or
pork
• Chinese people's diet is becoming more diversified and healthy, introducing larger
amounts of beef as beef has nutritional benefits to pork
– Beef has high protein content, low fat content with unsaturated fatty acids, thus making it a
healthier kind of meat compared to pork
• Additional regulation of China's beef industry will likely strive to ensure sufficient supply
of cattle and promote the development of the beef industry
– Chinese government policies are expected to support the adequate supply of cattle and
improve the quality of beef products resulting in safer and healthier beef products and a more
sophisticated beef consumption(2)
1
2
3
1) China’s growing appetite for meats: Implications for World meat trade. A Multi-Client Study, April 2012
2) China and Hong Kong: Food Opportunities for Maine, Maine International Trade Center, March 2012
Frost & Sullivan: China’s beef market has great growth potential
China’s growing appetite for meats: Implications for World meat trade. A Multi-Client Study, April 2012
3) Meat - OECD-FAO Agricultural Outlook 2012-2021
4) 2011 China Statistical Yearbook Table 10-9 and 10-33
Expected increase in meat demand between 2012 and 2021 by region(3)
Consumption Trends for Pork, Beef, Poultry and Mutton in China(4)
(Per Capita Consumption in kilogram per year)
Old
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3rd: 4 74 47
Highl: 255 192 0
Text: 83 86 90
New
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3rd: 123 205 244
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235
240
245
250
255
260
265
2013E 2014E 2015E
• Demand for fertilizer in China is forecasted to increase 3.3% per annum through 2015
• Fertilizer sales is expected to be supported by an expansion of agricultural activities as sown acreage continues
to grow and rural income levels rise
The Market for Fertilizer in China 5
43
Fertilizer Demand in China(1)
(Millions of metric tonnes)
• Demand for fertilizer in China is forecast to increase 3.3% per annum through 2015 to 262 million
metric tons
– Sales of fertilizers is expected to be supported by healthy expansion of agricultural activities
as the amount of sown areas continues to grow and rural income levels rise
– Farmers will continue to register steadily increasing incomes, the result of growing crop prices
and government subsidies designed to supplement their revenues and reduce their material
costs.
o Subsidies aimed directly at cutting the cost of fertilizers is expected to encourage
additional use
– Rising crop prices have encouraged farmers to invest in fertilizers to further boost crop yields
– Advances will also be driven by increases in the acreage of sown land dedicated to growing
cash crops
– However, increasing demand for organic food and improved understanding of the correct
application of fertilizers is expected to prevent demand from rising at a faster pace
• Demand for fertilizer nutrients in China is projected to grow 4.4%annually through 2015 to 98.1
million metric tons
– Nutrient demand will be stimulated by increasing use of higher nutrient level products as
income levels grow in rural areas in China
– In addition, government efforts to promote multi-nutrient fertilizers will also support gains in
fertilizer nutrient demand
– Accounting for more than three-fourths of total fertilizer demand in 2010, single-nutrient
fertilizers will remain the larger product type through 2015, despite a relatively low growth rate
of 2.1% per year
– Sales of single nutrient fertilizers will continue to be supported by their relatively low prices
– Multi-nutrient fertilizer demand will post a strong annual growth rate of 7.3% through 2015,
fortified by government efforts to promote their utilization(1)
• In 2006, the central government started a program intended to partially compensate farmers for
price increases in fuel, fertilizer and other agricultural inputs
– In the case of fertilizers, government support is part of several separate programs targeting
fertilizer producers, with cost reductions being passed along to farmers purchasing the input.
By 2009, fuel and fertilizer subsidies totaled $10.5 billion(2)
1) Fertilizers in China, Industry Study with Forecasts for 2015 & 2020, Freedonia Group; June 2012
2) USITC: China’s Agricultural Trade: Competitive Conditions and Effects on U.S. Exports, March 2011
3) The World Bank
Fertilizer Consumption(3)
(Kilos of fertilizer per hectare of arable land, annually)
0
100
200
300
400
500
600
2003-2007 2008-2012
China USA India
Old
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2nd: 128 192 47
3rd: 4 74 47
Highl: 255 192 0
Text: 83 86 90
New
1st: 123 167 65
2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
Agenda
44
1. Transaction Summary
2. Company Overview
3. Financial Review
4. Industry Overview
5. Appendix
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New
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2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
Group Organisational Structure
Capital Award Belize
(CA)
Prawn Farm 2
China
(ZSAPP)
Prawn Farm 1
China
(EBAPCD)
Cattle Farm 2
China
Macau EIJI
Company Macau
(MEIJI)
SJAP Beef Division
China
(SJAP)
HSA Beef
Division
China
(HSA)
A Power
Agriculture
Development Macau
(APWAM)
Fish Farm 1
China
(JFD)
Tri-way
Industries Hong Kong
(TRW)
Fishery Division
Beef, Cattle, Organic
Fertilizer & HU-Plantation
Divisions
Marketing
Company
HU-Plantation
China
(JHST)
Cattle Farm 1
China
(JHMC)
Pro
ject M
anagem
ent,
Consultin
g &
In
vestm
ent
Hold
ing C
om
panie
s
Join
t V
entu
re
Pro
ject C
om
panie
s
SINO AGRO FOOD
USA
Ultimate Holding Company
(SIAF)
45
Old
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2nd: 128 192 47
3rd: 4 74 47
Highl: 255 192 0
Text: 83 86 90
New
1st: 123 167 65
2nd: 205 220 68
3rd: 123 205 244
Highl: 201 28 26
Text: 82 94 82
Group Legal Corporate Structure
Capital Award Belize
(CA)
Capital Stage
Belize
(CS)
Capital Hero
Belize
(CH)
Zhongshan
A Power
Prawn Culture Farms
Development
China
(ZSAPP)
Enping City
A Power
Prawn Culture
Development
China
(EBAPCD)
Enping City A Power
Beef
Cattle Farm (2)
China
Macau EIJI
Company Macau
(MEIJI)
Qinghai SanJiang A
Power Agriculture
China
(SJAP)
Hunan Shenghua A
Power Agriculture
China
(HSA)
A Power
Agriculture
Development Macau
(APWAM)
Jiangmen City A
Power Fishery
Development
China
(JFD)
Tri-way
Industries Hong Kong
(TRW)
Dormant
Companies
Jiang Men City
Heng Sheng Tai
Agriculture
Development
China
(JHST)
Jiang Men City
Hang Mei Cattle
Cattle Farm
Development
China
(JHMC)
Pro
ject M
anagem
ent,
Consultin
g &
Investm
ent
Hold
ing C
om
panie
s
Join
t V
entu
re
Pro
ject C
om
panie
s
SINO AGRO FOOD
USA
Ultimate Holding Company
(SIAF)
Fishery Division
Beef, Cattle, Organic
Fertilizer & HU-Plantation
Divisions
Marketing
Company
46